Scrap sugar tax, say canegrowers

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The South African Canegrowers Association has again asked the treasury to scrap the sugar tax — or at least suspend the tax increase. 

This comes after the largest sugar producer in the country, Tongaat Hulett, went into voluntary business rescue in October because it could not pay back its lenders. With Tongaat in business rescue, the association said the industry was facing a “crisis”. 

But Karen Hofman, a director at the SAMRC/Wits Centre for Health Economics and Decision Science Research Unit, said: “These tactics by the Canegrowers Association are not new at all. They are creating doubt in the minds of the public and the treasury … We are becoming a nation of very obese people.” 

In November last year, the association said that in the first year of its implementation, the sugar tax resulted in 16 621 jobs being lost, a R653 million decline in economic investment and a R1.19 billion decline in the sugar industry’s contribution to GDP.

The association is affiliated to AgriSA and the South African Sugar Association.

The association said it made its submission to the treasury “in light of the crisis in which the South African sugar industry finds itself and the fact that, to date, there is no evidence that the tax has had a positive impact on obesity levels in the country”. 

The government introduced the health promotion levy — colloquially known as the sugar tax — in 2018 with the aim of reducing obesity and its associated health risks. The levy is charged on all non-alcoholic sugary beverages, and will be extended to fruit juices next year. 

A 2021 study by Hofman and her associates found that after the implementation of the sugar tax, purchases of sugar-sweetened beverages declined by 29% and sugar intake consumption decreased by 51%. The combined price increase and purchases of sugar-sweetened beverages generated R5.8 billion over the first two fiscal years of the tax being in place. 

“There were greater reductions in sugar sweetened beverages among both lower and higher socioeconomic groups. The lower socioeconomic groups bear larger burdens from obesity and related diseases, suggesting that this policy improves health equity,” according to the research paper. 

Hoffman’s Research done this year found that being overweight and obesity were estimated to cost South Africa’s health system R33 million a year. This represents 15.38% of government health expenditure and is equivalent to 0.67% of GDP. The annual per person cost of overweight and obesity was estimated at R2 769.

In comparison, the sugar industry contributes R18 billion to GDP, according to the South African Sugar Association. The beverage industry, which includes soft and energy drinks, contributes R17.5 billion in tax revenue to the fiscus, according to the Beverages Association of South Africa, an organisation that represents the interests of the non-alcoholic beverage industry. 

Hofman said: “The R33 billion a year is probably double if you add in all the people that are undiagnosed. The public healthcare sector, which is trying very hard to create the NHI [National Health Insurance] will fail.” 

The NHI’s mandate is to achieve universal health coverage for all South Africans, but the public healthcare sector is heavily burdened by the cost of avoidable lifestyle diseases, she said. 

On Monday, Health Minister Joe Phaahla said the NHI Bill would be tabled in the National Assembly next year. 

“The canegrowers should not be making health policy in South Africa, it is unwise,” Hofman said. 

According to a paper published recently on BMC, a platform of peer-reviewed academic journals, the prevalence of adult overweight and obesity in South Africa has increased and contributes substantially to deaths and disabilities from non-communicable diseases, including cardiovascular diseases, diabetes and some cancers. 

Statistics South Africa found that roughly 31% of men and 68% of women in the country are obese. 

Hofman said: “They [the sugar industry] are causing people to be absent from work, to retire early because of illness, to die very early, to have five amputations before they die because they have diabetes associated with their obesity, to have strokes and to impact the individuals and their families. This is a very serious matter for the country. 

“It is costing the country huge amounts of funds in both the public and private sector. The private sector is not exempt from this.” 

The International Diabetes Federation said 11.3% or 4.2  million adult South Africans have diabetes. 

Sugar low: Since sugar maker Tongaat (above) went into business rescue, the South African Canegrowers Association has complained that the government’s sugar tax, imposed on cooldrinks (below) and other goods is hurting the economy. Photos: Delwyn Verasamy and Mujahid Safodien/AFP

The canegrowers association made its submission following a call for comments on the Budget Review 2023, issued by the treasury in November.

“Tongaat Hulett alone serves more than 12 000 growers, who employ more than 14 000 farm workers in KwaZulu-Natal’s rural communities. This season, Tongaat Hulett operations are estimated to crush over 4 78 m tonnes of sugarcane, which is valued at about R3.23 billion. This is vital revenue that neither the industry, province, nor national economy can afford to lose,” the association said. 

The sugar industry is structured in such a way that there is one revenue pot from which growers and millers receive a share, according to the association. 

It was therefore impossible to isolate the consequences of any hardship to one section of the industry; when millers suffer, growers suffer and vice versa.

Last month, a consortium called NewCo announced that it had submitted an expression of interest in acquiring Tongaat Hulett’s South African mills, refinery, animal feeds subsidiary and other brands and trademarks. 

The association said the grower-led consortium seeking to save Tongaat Hulett operations would have a difficult time trying to accomplish that, with the sugar tax handicapping the industry. 

“To increase the sugar tax under these circumstances would further cripple the industry and lead to thousands of further job losses in addition to the more than 16 000 jobs already lost because of the sugar tax,” the association said. 

Hofman disputed this, saying the association was blaming the sugar tax for its woes because it had not looked “very hard” at the sugar master plan. 

“This is a red herring for the sugar industry.” 

The Sugar Industry Master Plan was signed in 2020. Its main strategic objective is ensuring that the foundational role of small-scale growers in the sugarcane value chain is safeguarded and expanded.

“They have paid no attention to their master plan at all, which could address some of their issues instead of wanting to scrap the sugar tax,” Hofman said.